1. Dino v Judal-Loot - case digest PDF

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WEEK 1 #01 DINO v JUDAL-LOOT G.R. No. 170912 | 19 April 2010 By: BAYLE Topic: Negotiable instruments; holder in due course; crossed check Petitioner: Robert Dino Respondent: Maria Luisa Judal-Loot Ponente: Carpio, J DOCTRINE: A crossed check warns the holder that it has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. FACTS:  Petitioner Dino was approached by a syndicate which induced him to lend 3M to be secured by REM on certain properties.  Petitioner Dino issued 3 Metrobank checks, one of which in the amount of 1M payable to Vivencia Ompok Consing and/or Fe Lobitana.  When petitioner Dino discovered that the properties were government properties, he advised Metrobank to stop payment on the checks. However, only payment for the 1M check payable Vivencia Ompok Consing and/or Fe Lobitana was stopped.  It appeared that the said check was negotiated by Lobitana to respondent in this case for P948,000. Before paying Lobitana, respondents inquired with Metrobank if the subject check was sufficiently funded to which Metrobank answered in the positive.  However, when respondent deposited the check, it was dishonored. Hence, respondent filed a collection suit against petitioner.  The trial court ruled in favor of respondent declaring them a holder in due course.  The CA affirmed the trial court’s decision. However, on appeal, it was revealed that the subject check was crossed check, but the CA noted that this defense was raised only for the first time on appeal.

ISSUE: Whether respondents are holders in due course – NO

RULING: NO. In the case of a crossed check, as in this case, the following principles must additionally be considered: A crossed check (a) may not be encashed but only deposited in the bank; (b) may be negotiated only once — to one who has an account with a bank; and (c) warns the holder that it has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. In the case at bar, respondents had the duty to ascertain the indorser's, in this case Lobitana's, title to the check or the nature of her possession. This respondents failed to do. Respondents' verification from Metrobank on the funding of the check does not amount to determination of Lobitana's title to the check. Failing in this respect, respondents are guilty of gross negligence amounting to legal absence of good faith, contrary to Section 52 (c) of the Negotiable Instruments Law. Hence, respondents are not deemed holders in due course of the subject check. Under usual practice, crossing a check is done by placing two parallel lines diagonally on the left top portion of the check. The crossing may be special wherein between the two parallel lines is written the name of a bank or a business institution, in which case the drawee should pay only with the intervention of that bank or company, or crossing may be general wherein between two parallel diagonal lines are written the words "and Co." or none at all. The effect therefore of crossing a check relates to the mode of its presentment for payment. Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must be made (a) by the holder, or by some person authorized to receive payment on his behalf . . . As to who the holder or authorized person will be depends on the instructions stated on the face of the check. In this case, there is no question that the payees of the check, Lobitana or Consing, were not the ones who presented the check for payment....